Developing Strategies

Creating and Presenting Strategic Plans

• Opportunit

y

•Poor performance

•External: industry transformation

•Failure looming

•Internal: leadership, management

• New chief executive

Triggers

• Grow

•Harvest

•Divest

The Strategies

•Hold

•Recover

•Recover

•Early action•Change top

management•Increase the revenues

•Reduce the assets

•Reduce the costs

•Hold•Hope and

monitor

•Harvest

•No investment - run down and milk

•Divest

•Sell for what you can get

The other Strategies

Grow

Organic

Concentric

Conglomerate

Acquisition

Concentric

Conglomerate

+

Slower but

safer

Quicker but

riskier

Grow

Markets NewExisting

DiversificationProduct

development

Products

New

ExistingMarket

developmentMarket

penetration

Low

Risk

High

The Ansoff Growth Matrix

•Differentiation

•Focus

•HVLC

The Generic Strategies

1. Market Penetration

•HVLC using low price

•Differentiation using premium price

M&S: Net profit:

97/98: £815.9 Mn,

01/02 £2.8 Mn,

13/14 £525 Mn.

•Lowest risk

Amazon

Damned if you do and damned if you don’t

•Geography

•New segments

•IKEA: 278 stores in 36 countries

•Major high tech: Cloud computing

•Higher risk

2. Market Development

•Enhancement of existing

•New product

•Ford: Mondeo, Focus, Fiesta, Ka

•Apple Watch 2015

•Higher risk

3. Product Development

Two routes

•OrganicBuying another

firmOwn resources

•Acquisition

Two types

•Concentric

•Unrelated

•Concentric

•Unrelated

Lenova ITTHitachiiPad

4. Diversification

4. Diversification: so tricky

•Gallaher Group

•Microsoft

Source: http://www.forbes.com/sites/adamhartung/2013/01/20/sell-microsoft-now-game-over-ballmer-loses/

1970: Diversify: retail distribution, housewares, optical goods,and distilling

1993: Back to tobacco

2007 Sold to Japan Tobacco

‘Microsoft needed a great Christmas season.  After years of product stagnation, and a big market shift toward mobile devices from PCs, Microsoft’s future relied on the company

seeing customers demonstrate they were ready to jump in heavily for Windows8 products – including the new Surface tablet. But that did not happen. With the data now coming it, it is

clear the market movement away from Microsoft products, toward Apple and Android products, has not changed.’

Heuskel, D, Fechtel, A. and Beckman, P., ‘Managing for Value: How the World’s Top Diversified Companies Produce Superior Shareholder Returns, Boston Consulting Group, available at: http://

www.bcg.com/documents/file14912.pdf

4. Diversification: Does it Pay?

Diversifiedsunderperform: not true

Focus may add value

More focusmore returns: not true

Diversifieds better in US and Asia. Europe pressure to focus

Diversifiedshave fiveperformancelevers for

valuecreation

A Generic Strategy Template

• Assume: It will cover this year and the next two years.

•Two Levels: Overall and Product Market

Part 1 Overall

Mission: Words such as Leader, Quality, Service, Growth, Risk.

Strategy: Words such as Growth, High Volume Low Cost, Differentiation, Brand, Focus, Sales, Competitive Position, Customers, Asset utilisation, Productivity, Leadership, People, Market Penetration, Market Development, Product Development, Diversification, Profitability, Stakeholder Returns, Portfolio Balance, Leader, Quality, Service, Growth, Risk.

Projected Performance: Income Statements, Balance Sheets, Cash Flows, Ratios, Profitability, Stakeholder Returns, Risk.

Goals: Qualitative and quantitative.

Part 2: Product Market

Business Definition today and in 3 years.

Product market portfolio today and in 3 years: Words such as Build, Hold, Harvest, Divest, Balance and Risk

Competitive positions today and in 3 years: Words such as Leader, Follower, Superior, Quality, Customer Balance and and Risk.

Sales by product today and in 3 years: Words such as Relative Market Share, Quality, Growth, Geographical Spread, Life Cycle, Concentration, Strategy, Profitability and Risk

Leadership and People Development today and in 3 years: Words such as Skills, Succession, Training, Absenteeism.

Asset Utilisation today and in 3 years: Words such as Efficiency, Plant usage, Personal productivity

The End